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ACCA Strategic Professional · Strategic Business Leader · Strategic choices

Kestrel Pharma and Orion Biotech each hold complementary research skills. They create a separate jointly owned company, with each owning 50% and sharing board seats, to develop and sell a single new drug. Both parent companies continue their other operations independently. Which form of development is this?

This is a joint venture. The two firms create a new jointly owned company with shared equity and governance for one specific project while remaining independent elsewhere. It differs from licensing, which is purely contractual, and from acquisition, where one firm takes control of the other.

  1. AJoint ventureCorrect
  2. BHostile acquisition
  3. CLicensing agreement
  4. DOrganic diversification

Explanation

A separate entity with shared ownership and control created for a defined purpose is a joint venture, a form of equity-based alliance. Licensing is contractual without a new entity, and acquisition would involve one party taking control of the other.

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